New Zealand dairy processor Fonterra has increased its forecast milk price for the 2016/17 milking season by 50cents to $5.25/kg of milk solids. This is the second time in less than a month that Fonterra has increased its milk price outlook for the year ahead after it raised its initial forecast from $4.25/kg to $4.75/kg.

When dividends from the co-op are included, Fonterra said that its farmer suppliers can expect to earn a total average payout of $5.75 to $5.85/kg for the year ahead, which is very close to the estimated average cost of production in New Zealand at $6/kg.

Fonterra chairman John Wilson said the co-op had reviewed its forecasted milk price upwards in response to falling milk production in the EU and New Zealand combined with stable demand.

The news of this latest milk price increase from Fonterra comes just hours after the GDT returned its fourth consecutive positive result with average prices lifting a further 1.7% at this week’s auction.